iRobot Corporation (IRBT), Demandware Inc (DWRE): Three Stocks Near 52-Week Lows Worth Buying

Priced for perfection
Software-as-a-service provider Demandware Inc (NYSE:DWRE) certainly commands quite the premium valuation as enterprises transition from individual computer systems to software capable of integrating customers’ information in the cloud on one Web-based platform. The beauty of such software designs is that they result in recurring revenue and regular upgrades.

The worry I have with Demandware Inc (NYSE:DWRE), as I’ve stated in multiple instances before with SaaS companies, is that it could be years before expenses shrink enough, and organic growth is powerful enough, for the company to turn a profit. At the moment Demandware Inc (NYSE:DWRE) is well capitalized, with $102 million in net cash, but could burn through some of this cash as it increases its staff and R&D spending. With losses expected through 2014 and the company valued at 11 times book and 12 times sales, it’s not exactly a value play by even the loosest interpretation.

The other concern, similar to iRobot’s, is that government spending reductions could trickle down to enterprises, which, in turn, could quickly slow Demandware Inc (NYSE:DWRE)’s growth rate. If Demandware Inc (NYSE:DWRE) has any shot of turning a profit, it’ll need to pare down its spending and it’ll need a pickup in enterprise spending that I just don’t see happening.

Foolish roundup
This week it’s all about keeping your expectations reasonable. In the case of Kandi Technolgies Corp. (NASDAQ:KNDI), with its newly authorized EVs, iRobot, with its consumer-driven Roomba, and Demandware Inc (NYSE:DWRE), with its single-platform software sales, the potential on paper is certainly there. However, from a valuation basis the chance of success seems pretty low over the interim.

I’m so confident that these three names will bounce off their lows that I’m going to make a CAPScall of outperform on each one.

The article 3 Stocks Near 52-Week Lows Worth Buying originally appeared on Fool.com is written by Sean Williams.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends, Tesla Motors . It also recommends iRobot.

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